This case explores the issue of unconscionability from a unique angle – where, at the insistence of her husband, a wife uses her inheritance to pay down a joint debt and the husband leaves the marriage shortly thereafter – should net family property be divided equally?
The parties were married for 11 years and had two children. Just prior to separation, the wife received a gift of $200,000 from her father. By this point, the marriage had been experiencing difficulties for a number of years and in a last-ditch effort to save it, the wife acceded to the husband’s request that she use $180,000 from the inheritance to pay off the couple’s joint line of credit.
Shortly after the debt was cleared, the husband announced that he had purchased a condominium and would be leaving the marriage. Notably, the husband had not expressed any intention to leave up to the time that the wife’s inheritance was applied to the joint debt.
Lower Court Holding
At trial, one of the few contested issues that remained between the parties was whether the wife was entitled to an unequal division of net family property by the amount of $90,000, representing the amount that the husband benefited from the wife’s application of her inheritance to the joint line of credit.
Acknowledging that the threshold for unconscionability is high and that the court has limited discretion by which to make such a finding, the trial judge reasoned that an unequal division of net family property was nevertheless appropriate based on the facts of the case.
In particular, the trial judge found that the timing of the gift warranted unequal division, as the parties’ separation after the wife paid off the joint debt resulted in a windfall to the husband, whose net family property increased considerably as a result of the payment.
In addition, notwithstanding her payment towards the joint debt, the wife’s inheritance would otherwise have been regarded as excluded property under s. 4(2) of the Family Law Act and she would have retained the full amount of the inheritance after the parties’ net family property had been divided.
The trial judge also considered the fact that the wife had sacrificed her career to stay home and raise the children and the unlikelihood that she would have used her inheritance to pay the joint debt had she known that her husband would leave the marriage shortly after.
Based on these reasons, the trial judge found that to allow an equal division of net family property would shock the conscience of the court, and indeed, any fully informed and reasonable observer. He therefore ordered an unequal division of net family property based on unconscionability under s. 5(6) of the Family Law Act
The husband appealed.
At the outset, the Court of Appeal pronounced the standard of review for the appeal, namely that it could only interfere with the trial judge’s decision with respect to the division of matrimonial property if there was a misdirection or a decision so wrong that it clearly amounted to an injustice.
The court engaged in a review of relevant sections of the Family Law Act pertaining to unconscionability, pausing to review the doctrine as interpreted in the case of Serra v. Serra. Specifically, the court emphasized the Serra court’s holding that a finding of unconscionability does not have to rest on fault-based conduct and may flow from the financial result that the spouses are left with.
Affirming the trial judge’s holding based on the reasons previously discussed, the Court of Appeal was prudent in cautioning that “not every case where a spouse receives a gift comingled with matrimonial property will warrant a subsequent unequal division of property”. Upon reviewing the relevant jurisprudence surrounding matrimonial gifts and division of property, the court concluded that the trial judge had not made an error of law or fact and that the judge further correctly understood and applied the threshold for unconscionability.
On this basis, the husband’s appeal was dismissed.